Otherwise known as reported speech, for example:
Kate told Jack what happened.
Sometimes reported speech in fiction just doesn't work. I don't mind it when it's like the example above, where the reader already knows something, but we need to know Jack's reaction to hearing about it too. There is no sense in having Kate explain everything we just read - unless she has a particularly interesting or inaccurate spin on it.
What I don't like is this:
Kate heard the sound of Jack's key in the door at half past six on the dot. She rushed out of the kitchen and told him what had happened when she was in Matt's.
Kate heard the sound of Jack's key in the door at half past six on the dot. She came rushing out of the kitchen and told him that Matt had burned the deeds to the house.
To me, that just sounds a little clunky and forced - it's telling and not showing.
But we don't want to hear about Matt and his fit of temper again. If we're in Kate's head, we've probably just come from Matt's. We don't need 'then he said. . . then I said. . . then he got the matches and WHOOSH.'
What I find works better is something like this:
. . . She came rushing out of the kitchen.
'Are you OK?' Jack asked, as he hung his coat up.
'No,' Kate said. 'I went to visit Matt today.'
It pained Kate to recount the whole afternoon. When she finished, Jack raised his head slowly and looked her in the eyes.
'You know what this means,' he said. 'It means we have the only copy.'
The only reason to include something like this at all is so Jack can say the last line. But the indirect speech in there - 'It pained Kate to recount the whole afternoon' - kind of slips in unnoticed.
Indirect speech is great, and probably saves millions of trees each year. But it's also hard to get right sometimes!